Author: Jin Kyo Suh, KIEP
After then South Korean deputy prime minister Hong Nam-ki remarked in December 2021 that, ‘the government aims to apply for membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)’, controversy over the country’s entry has been rekindled.
South Korea had considered joining the Trans-Pacific Partnership, the CPTPP’s predecessor, since 2013. Outgoing president Moon Jae-in once again expressed his interest in the CPTPP in his 2021 New Year’s address, but significant challenges still lay ahead.
It was China’s and Taiwan’s applications to join the CPTPP that changed South Korea’s thinking. Joining the CPTPP after China would greatly raise entry costs since South Korea would have to negotiate its terms of accession with China, and be left out of the negotiations for China’s entry. The Moon government thus decided to apply for membership as soon as possible, proclaiming its intention to join more actively than ever. The government intends to be included in the establishment of a working group for China, Taiwan and Ecuador by CPTPP members. But there are several hurdles to overcome.
The first is a public hearing, which is held on March 25th and expected to face strong resistance from the agriculture and fishery industries. Although South Korea has signed FTAs with most CPTPP members, agricultural tariff elimination in such FTAs averages just 75 per cent. In particular, the concession rate in the South Korea–China FTA is only 64 per cent. The CPTPP has an agricultural tariff elimination rate of almost 99 per cent, a huge percentage jump. In the past, public hearings have often been interrupted by radical opposition from farmers’ groups. The government has sought to assuage their concerns with the promise of compensation for damages incurred.
Strangely, there has been no concrete discussion of the economic benefits for South Korea if it joins the CPTPP, such as an increase in real GDP or national welfare. Considering that the government has always previously emphasised the positive effects of FTAs, the omission shows that the current situation is quite different. The government’s silence is perhaps best explained by recent research which indicates the economy would only grow by 0.5 per cent after joining the CPTPP, as South Korea already has FTAs with most CPTPP members. Still, the government should more vigorously inform the public of the benefits of the CPTPP to pass the first hurdle.
The second hurdle, which is perhaps more difficult to overcome, is South Korea’s current political environment. The Yoon Suk-yeol administration was elected on 9 March with the smallest margin in South Korea’s parliamentary history (0.72 per cent). Until Yoon assumes office in May, all important policy decisions must be made in consultation with the Presidential Transition Committee. It is unlikely that President-elect Yoon will want to confront the agriculture and fishery industries so soon at the start of his term. Given his narrow victory, Yoon will likely consider it more important to pursue national unity than to join the CPTPP. South Korea’s CPTPP membership application is likely to be postponed until after the new government’s trade policy is finalised.
Finally, resolving diplomatic conflicts with Japan could be another obstacle to joining the CPTPP. On the bright side, the Yoon government is highly likely to take a more forward-looking stance in relations with Japan than the Moon government. In particular, Yoon is well aware of the need for a separation of politics and economics in trade negotiations with Japan. South Korea is also well-prepared for accession negotiations, so process can be fast-tracked in a very short period of time. South Korea and Japan are well aware of each other’s strengths and weaknesses, so the two countries should both know where compromise is needed.
The most feasible way for South Korea to apply for CPTPP membership is for the current Moon administration to do so before its term runs out, despite political opposition. But Moon would be likely to receive significant criticism for such a decision and may even face political difficulties after his retirement. As a result, it is unlikely that President Moon will make such a difficult decision. Short of such a sacrificial decision, South Korea’s accession to the CPTPP looks set to be significantly delayed.
Jin Kyo Suh is Senior Research Fellow at the Korea Institute for International Economic Policy.
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